Criminal Finances Bill

John Bercow Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 21st February 2017 Commons Chamber

[The Minister for Security (Mr Ben Wallace)]

I beg to move, That the clause be read a Second time.

[Mr Speaker]

With this it will be convenient to discuss the following:

New clause 1—Civil recovery: gross abuse of human rights—

‘(1) Part 5 of the Proceeds of Crime Act 2002 (civil recovery of the proceeds etc. of unlawful conduct) is amended as follows.

(2) In section 241 (which defines unlawful conduct), after subsection (2), insert—

“(2A) Conduct which—

(a) occurs in a country or territory outside the United Kingdom and has been designated as conduct by a person connected to a gross human rights abuse in accordance with the provisions of section 241B, and

(b) if it occurred in a part of the United Kingdom, would be or would have been unlawful under the criminal law of that part at the relevant time,

is also unlawful conduct.”

(3) After section 241 (which defines unlawful conduct), insert—

“241A Conduct connected to a gross human rights abuse

(1) “Conduct connected to a gross human rights abuse” means—

(a) involvement by a Person (“A”) in torture or other serious breaches of human rights and fundamental freedoms against a Person (“B”) where B sought or seeks—

(i) to expose illegal activity carried out by foreign public officials, or

(ii) to obtain, exercise, defend or promote human rights and fundamental freedoms,

(b) activities by a Person (“C”) as an agent in a matter relating to an activity by A described in paragraph (a),

(c) activities by a Person (“D”) to profit from, materially assist, sponsor, or provide financial, material or technological support for, or goods and services in support of, an activity by A described in paragraph (a),

(d) commission by a Person (“E”), whether or not a foreign public official, of the illegal activity described in paragraph (a)(i).

(2) For the purposes of this section, it is immaterial where the conduct occurred.

(3) In this section “human rights and fundamental freedoms” means the “Convention rights” as defined in section 1 of the Human Rights Act 1998.

241B Designation of conduct connected to a gross human rights abuse

‘(1) The High Court may make an order designating that the actions of the respondent constitute conduct connected to a gross human rights abuse and, if considered appropriate, that—

(a) a person is prohibited from dealing with property, funds or economic resources owned, held or controlled by the respondent if the person knows, or has reasonable cause to suspect, that the person is dealing with such property, funds or economic resources,

(b) a person is prohibited from making property, funds or financial services available (directly or indirectly) to the respondent if the person knows, or has reasonable cause to suspect that the person is making the funds or financial services so available,

(c) a person is prohibited from making funds or financial services available to any person for the benefit of the respondent if the person knows, or has reasonable cause to suspect, that the person is making the funds or financial services so available.

(2) An order under subsection (1) may only be made on application.

(3) An application for an order under subsection (1) may be made by—

(a) the Secretary of State,

(b) an individual, or

(c) an entity, including a non-governmental organisation.

(4) An application for an order under subsection (1) must be supported by a statement of information which addresses—

(a) the circumstances surrounding the respondent’s conduct connected to a gross human rights abuse, and

(b) the nature and extent of the respondent’s involvement.

(5) An application for an order under subsection (1) may be made without notice to the respondent to a judge in chambers.

(6) The Court must be satisfied that it is in the public interest to make an order under subsection (1).

(7) The Court shall reach a decision on an order under subsection (1) on the balance of probabilities.

241C Duration, extension, variation and discharge of an order

‘(1) The High Court shall specify the duration of an order under section 241B(1) which shall not exceed two years.

(2) In determining the duration of an order, the Court shall have regard to the likely duration of consequential proceedings under this Part.

(3) The Court may extend an order for a maximum period to two years at any time before it expires, if it is satisfied that the requirements of a designation order continue to be met.

(4) An extension application may be made without the need for a hearing if the court considers it appropriate.

(5) An application to extend, vary or discharge an order may be made to the court by—

(a) the Secretary of State,

(b) the applicant,

(c) the respondent, or

(d) any person affected by the order.

(6) An application to discharge a designation order must be made by the applicant as soon as reasonably practicable in circumstances where the requirements of an order are no longer satisfied.

241D Appeals, etc.

‘(1) The following persons may appeal to the Court of Appeal in respect of the High Court’s decision on matters falling to be decided under sections 241B and 241C—

(a) the applicant,

(b) the respondent, or

(c) any person affected by the order.

(2) On an appeal under subsection (1) the Court of Appeal may—

(a) confirm the decision, or

(b) make such orders as it believes appropriate.

(3) An appeal lies to the Supreme Court from a decision of the Court of Appeal on an appeal under this section.

(4) An appeal under this section lies at the instance of any person who was a party to the proceedings before the Court of Appeal.

(5) On an appeal under this section the Supreme Court may—

(a) confirm the decision of the Court of Appeal, or

(b) make such order as it believes is appropriate.

241E Standard to be applied

All matters to be determined by a court under sections 241B to 241D are to be decided on the balance of probabilities.

241F Costs

In the exercise of its discretion, a court may, on application, make a costs capping order in respect of proceedings under sections 241B to 241D.

241G Duties in respect of gross abuse of human rights

‘(1) It shall be the duty of the Secretary of State to apply for an order under section 241B where the Secretary of State is satisfied that—

(a) the requirements for the making of an order are met; and

(b) it is in the public interest to make the application.

(2) It shall be the duty of the Secretary of State to maintain a public register of—

(a) individuals in respect of whom orders have been made under section 241B(1),

(b) the circumstances giving rise to the making of such orders, and

(c) any decisions of a court under sections 241C and 241D in relation to such orders.

(3) In any case where a relevant authority considers that evidence is available of property being held by a person in respect of whom an order has been made under section 241B which may represent property obtained through unlawful conduct, it shall be the duty of the relevant authority to seek to initiate proceedings for civil recovery under this Part.”

(4) In section 304 (which defines recoverable property), after subsection (1), insert—

“(1A) Property of a person who is the subject of a designation order under section 241B is presumed to have been obtained through unlawful conduct unless the contrary is shown by the respondent.””

This new clause extends the scope of unlawful conduct for the purposes of Part 5 of the Proceeds of Crime Act 2002 to cover to certain actions connected to a gross human rights abuse which has taken place abroad.

Government amendments 58 and 59.

[Mr Wallace]

Some time has passed since we last considered this Bill. There was, as hon. Members will recall, a great deal of cross-party consensus on it, both on Second Reading and in Committee, and I hope that we will be able to continue in that same spirit of constructive debate and healthy scrutiny today.

This first group of amendments concerns the extremely grave matter of gross human rights abuses or violations. The Government are committed to promoting and strengthening universal rights globally, and I welcome the opportunity to debate this issue. In particular, these amendments have been prompted by the harrowing case of Sergei Magnitsky. Magnitsky was not a serious criminal; he was a lawyer who tried to blow the whistle on large-scale tax fraud in Russia, and he believed that he would be protected by the law. Unfortunately, he died in state custody in 2009 after suffering both mistreatment and assault, and being denied medical attention. I share the strong feelings of many hon. Members about this case, and I want to reassure the House that the Government have expressed, both publicly and to the Russian Government, our serious concerns about Mr Magnitsky’s death. Of course, we must also remember that his case is only one of many atrocious human rights violations committed globally each year.

As I am sure that hon. Members will highlight, the US has legislated to prohibit the entry of certain named individuals to the US and to forbid them use of the US banking system. Less than two months ago, President Obama’s Administration extended the legislation so that it could be applied to those involved in human rights violations, wherever in the world they have taken place. That sends an important signal that perpetrators of gross human rights violations will face consequences. However, we have an entirely different legal system, which merits a different approach.

I pay tribute to those hon. Members who have raised this issue by tabling new clause 1—in particular, my hon. Friend the Member for Esher and Walton (Mr Raab), the right hon. Members for Barking (Dame Margaret Hodge) and for Carshalton and Wallington (Tom Brake), and the hon. Member for Ross, Skye and Lochaber (Ian Blackford). I am grateful to hon. Members for giving me advance notice of the amendment, and am pleased to have had the opportunity to discuss it with many of its signatories.

It has always been the Government’s position that for further legislation to be warranted on this issue, there would need to be a real case that existing powers were insufficient. I hope that hon. Members will agree that we should avoid doing anything that might have an impact on the effectiveness of our existing sanctions and civil recovery powers. The National Crime Agency has confirmed that it has considered all the material provided to it on the Magnitsky case. It concluded that the individuals whom we believe to be connected to the case do not reside in the UK, and it has identified no assets of value in the United Kingdom that are connected to the case, so the additional powers proposed in new clause 1 would have no obvious material effect on the individuals involved in this case.

--- Later in debate ---

[Sue Hayman (Workington) (Lab)]

On a point of order, Mr Speaker. I wonder whether you could advise me. I have been to Downing Street today, along with a constituent who had travelled all the way from west Cumbria to hand in a petition. Unfortunately, we were turned away at the gates. I was told that I would not be allowed to go to Downing Street to hand in a petition that had been booked in through the proper procedures. We had been offered a time to hand in a petition about health services, so it was understood what the petition was about. However, when I asked the security officer from No. 10 Downing Street why I was not allowed to hand in the petition, as had been agreed, he told me that today was “not a good day”. When I pressed him, he told me that I could hand in the petition “after Thursday”.

I am concerned that I have been prevented from handing in a petition that was properly booked in, through the proper procedures, because of a by-election, and that this has been politicised. Can you advise me, Mr Speaker, on what is my best course of action?

[Mr Speaker]

I am grateful to the hon. Lady for her point of order and for giving me a moment’s notice of it. She is clearly concerned and aggrieved. My initial response is to say to her that this is not a point of order for the Chair, or, for that matter, a subject for the House authorities. I understand her concern, not least in terms of personal inconvenience, and I trust that her point of order has been heard on the Treasury Bench. It is very much a matter for Ministers, with whom it has not been registered, but I repeat that it is not a matter for the Chair.

Third Reading

--- Later in debate ---

[Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)]

We in the Opposition broadly support the thrust of this legislation, and we have noted that the Minister has proved to be a listening Minister, which we welcome.

Tax avoidance and money laundering are the opposite of victimless crimes. In the first instance, there are inflated asset prices in the territories where the money is laundered, and there is no bigger example of that than the housing market in this country, particularly in London. In some of the most expensive parts of London, we can walk down streets where most of the houses are completely empty. Some might be empty because it is the wrong time of year for their owner to be there, and others because they have been bought as an investment, but increasing numbers of those properties are being used to launder money, and if this legislation can bear down on that, it will be of value not least to people who are victims of the wildly inflated London housing market.

Tax avoidance and money laundering mean a loss of tax for some of the poorest communities in the world. I was in Ghana last year looking at tax avoidance and evasion, and I was struck by the fact that a woman selling drinks by the side of the road could pay proportionally more tax than some of the biggest drinks manufacturers in the world. These are distorted systems of taxation, and if this legislation can bear down on that type of tax avoidance, it is to be welcomed. I was pleased to hear the Minister say that we are beginning to return money to some of those territories, notably Macau. I believe that we have also signed an accord with Nigeria. Above all, this legislation is important for suppressing corruption. It is not just a law-enforcement measure; it is also, indirectly, an anti-corruption measure.

I remind the House that the genesis of the Bill was the Panama papers, which revealed extremely widespread and highly lucrative avoidance of tax on an industrial scale. There were 11 million leaked files, and Britain was the second most prominent country in which the law firms’ middlemen operated. It was second only to Hong Kong. One British overseas territory, the British Virgin Islands, was by far the most popular tax haven state used by the firms in the documents. The Minister has said that we are at the forefront of taking action on tax avoidance and money laundering, and so we should be. The UK has sovereignty over one third of tax havens internationally.

We welcome the Government’s new clause 7, which will bear down on money recycled as a consequence of human rights abuses elsewhere. We still believe that there is insufficient scope for the civil recovery of assets, and the enforcement powers in the civil recovery provisions could be improved. There are particularly important omissions regarding the penalties for offences relating to the facilitation of tax avoidance, involving middlemen such as lawyers, accountants and straightforward spivs such as those identified in the Panama papers.

On the disclosure of beneficial ownership, we feel that there is a major problem, as the lack of disclosure can help to facilitate money laundering and corruption. Let us take an example. In the Department for Business, Innovation and Skills consultation paper published in March 2016, the Government said that between 2004 and 2014, more than £180 million-worth of property in the UK was being investigated by UK law enforcement agencies as it was suspected of being funded by the proceeds of corruption. Moreover, more than 75% of those properties had offshore corporate ownership. That is believed to be the tip of the iceberg in terms of scale and of the proceeds of corruption being invested in UK property through offshore companies.

On the British overseas territories and Crown dependencies, I understand the technical argument that we cannot apply the same regime to those areas, but the moral issue is substantially the same. Some Members have spoken as though the populations of those territories as a whole benefit from financial services, but that is not the case. Only in recent years has the financial services industry been open to employing people born and bred on those islands in advisory, legal and management positions. Just because the political elites in those countries argue for light-touch regulation, let us not delude ourselves that financial services are helping the territories as a whole. We believe that the argument that we cannot impose proper standards on those territories is false. UK jurisdiction applies in all matters of defence and security, and the House has a right and a duty to see how best to impose those laws.

The people who are benefiting from the secrecy and the lack of regulation are the tax evaders and avoiders, the money launderers, the major criminal enterprises and the terrorist networks. We urge the Government to move forward on those issues. If legislation is required for onshore activity here in the UK, most reasonable people would argue that it is even more pressing to include overseas territories and Crown dependencies.

The Opposition are calling for a wide-ranging review of the UK tax gap, including an assessment of the loss of income tax due to tax evasion. As several Members on both sides of the House have said, if the legislation simply rests on the statute book and does not result in commensurate prosecutions, it will be a dead letter. We note that the Minister has listened thus far, and I hope that the Government and the appropriate Departments are listening when I urge them to ensure that the legislation amounts to more than just good intentions and that it is actively used to bear down on tax evasion, money laundering and corruption.

[Mr Speaker]

This debate has been concluded with notable speed.

Question put and agreed to.

Bill accordingly read the Third time and passed.